The European Union has condemned a move by separatists in eastern Ukraine to create a new state called Malorossia, or Little Russia, and urged Moscow to distance itself from the proposition.

"Recent 'declarations' and provocative rhetoric from so-called leaders regarding certain areas of the Donetsk and Luhansk regions of Ukraine not currently under the control of the government run counter to the objectives of the Minsk agreements," an EU spokeperson said on July 19, referring to a 2015 cease-fire and peace deal.

The statement came a day after Aleksandr Zakharchenko, leader of Russia-backed separatists who control part of Ukraine's Donetsk region, proclaimed the creation of what he described as a new state that would encompass almost all of Ukraine and have its capital in Donetsk.

"The European Union expects Russia to distance itself unequivocally from such 'declarations' or actions that violate the spirit of negotiations in which it is engaged, stepping up its efforts to bring this conflict to an end," the EU said.

"This most recent deplorable development is part of a worrying trend that includes 'administrative measures' such as the expropriation of companies, the declaration of a 'state border' or adoption of currencies other than the Ukrainian hryvnya in Donetsk or Luhansk," it said.

"In parallel, the EU also continues to support an inclusive approach on Ukraine's part towards Ukrainian citizens living in areas not currently under the control of the government."